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Why Lululemon is quitting the Toronto Stock Exchange

These are stories Report on Business is following Monday, June 10, 2013.

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Day to leave Lululemon
Shares of Lululemon Athletica Inc. sank in after-hours action today after the company posted strong first-quarter earnings, announced plans to quit Canada's main stock exchange, and disclosed its chief executive officer plans to leave.

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Christine Day said she'll step down when her successor is named, The Globe and Mail's Marina Strauss reports.

"Plans have been laid for the next five years and a vision set for the next 10," Ms. Day said in a statement.

"Now is the right time to bring in a CEO who will drive the next phase of Lululemon's development and growth. I will continue to actively lead the organization while the board searches for a new CEO, and will work to ensure a smooth transition."

Lululemon also posted a 21-per-cent jump in revenue for the quarter to $345.8-million (U.S.), a 7-per-cent increase in same-store sales, and profit of $47.3-million or 32 cents a share, compared to $46.6-million, also 32 cents, a year earlier.

Lululemon also projected second-quarter revenue of $340-million to $345-million and full-year sales of $1.645-billion to $1.665-billion, with earnings per share of between 33 cents and 35 cents for the quarter, and $1.96 and $2.01 for the year.

Shares fell about 15 per cent in after-hours trading.

The company also plans to delist from the Toronto Stock Exchange, and stay on Nasdaq, later this month, saying there simply isn't enough trading on the Canadian exchange.

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"The company believes that the minimal trading volume of its shares on the TSX no longer justifies the expenses and administrative efforts associated with maintaining this dual listing," Lululemon said, saying June 24 would be the last day of Canadian trading.

"The company's listing with Nasdaq provides its shareholderholders with sufficient liquidity, as Nasdaq accounts for nearly all of the company's current trading volume," it said, adding that Canadian shareholders "will be able to continue to trade through their brokers on that market."

OPC seeks more information
Canada's privacy watchdog says it wants to learn more about U.S. and Canadian surveillance programs, flagging "significant concerns" about the American snooping scheme.

The Office of the Privacy Commission of Canada was responding today to questions surrounding the rising controversy of the U.S. PRISM program and a separate Canadian surveillance operation, details of which were disclosed today by The Globe and Mail's Colin Freeze.

"Our office has been following developments as reported on this matter and the scope of information reportedly being collected raises significant concerns," said a spokesman for the agency headed by Privacy Commissioner Jennifer Stoddart.

He was referring to the National Security Agency's PRISM program, which is aimed at gathering information from foreigners, and has caught up several major technology firms, including Facebook Inc., Google Inc., Yahoo Inc., Apple Inc., Microsoft Corp., YouTube, Skype and others.

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"Based on the limited information we have, it is difficult to assess the merit of the allegations and how American law may apply to the situation," the OPC spokesman said.

"In addition, while this is an issue with privacy implications, it also involves issues in which our office lacks specific specialization."

The PRISM program has sparked a storm of controversy not only in the U.S., but around the world given the implications for foreigners.

"Going forward, we plan to express our concerns to and seek information from the commissioner of the Communication Security Establishment to determine how the personal information of Canadians may be affected," the OPC said in an e-mailed statement.

"Our office also plans to contact fellow international Data Protection Authorities who may share similar concerns about the personal information of their citizens to discuss combining fact finding efforts on this matter as appropriate."

The OPC said it was also seeking more information about the Canadian scheme, an electronic eavesdropping program run by the Communication Security Establishment that, Mr. Freeze reports, scours phone records and Internet data trails, including those of Canadians.

"The growth of national surveillance programs aided by information technology continues to be a matter of longstanding interest and concern for privacy commissioners' offices within Canada and data protection authorities around the world," the OPC said.

"When it comes to the CSE's metadata program, we know very little specific information at this point, but we want to find out more," it added.

"The CSE has a dedicated oversight body in the form of the Office of the Commissioner of the CSE.  Our office plans to consult the Office of the Commissioner of the CSE to gain further details about this issue as well as what actions it may be planning or have underway in relation to the metadata program."

Just last week, in her annual report to Parliament, Ms. Stoddart warned that Canadian privacy laws are lagging, and are not up to snuff given the march of technology.

"While other nations' data protection authorities have the legal power to make binding orders, levy hefty fines and take meaningful action in the event of serious data breaches, we are restricted to a 'soft' approach: persuasion, encouragement and, at the most, the potential to publish the names of transgressors in the public interest," she said, referring to the Personal Information Protection and Electronics Documents Act.

"All told, stronger enforcement measures in PIPEDA would provide incentives for organizations to their responsibilities more seriously in the first place and build in privacy protections up front, knowing that the financial consequences of breach under a stronger regime could be real and significant," Ms. Stoddart said.

Separately, the U.S. contractor that employs the whistleblower behind the U.S. controversy is distancing itself from him, and its stock is falling.

Shares of Booz Allen Hamilton Holding Corp. sank today after Edward Snowden allowed himself to be identified as the man behind the leak last week of details of the PRISM program and a scheme to monitor phone records.

"Booz Allen can confirm that Edward Snowden, 29, has been an employee of our firm for less than three months, assigned to a team in Hawaii," the company said yesterday.

"News reports that this individual has claimed to have leaked classified information are shocking, and if accurate, this action represents a grave violation of the code of conduct and core values of our firm," it said in a statement.

"We will work closely with our clients and authorities in their investigation of this matter."

Mr. Snowden, who in the past worked as a computer technician at the Central Intelligence Agency, is said to be in Hong Kong.

S&P boosts outlook for U.S.
Standard & Poor's, the U.S. ratings agency that knocked the United States for a loop two years ago when it stripped the country of its triple-A rating, now says things are looking up.

S&P held its ratings steady today, but boosted its long-term outlook to "stable" from "negative," citing a better outlook on the both the economic and fiscal fronts.

"The stable outlook indicates our appraisal that some of the downside risks to our 'AA+' rating on the U.S. have receded to the point that the likelihood that we will lower the rating in the near term is less than one in three," S&P said.

"We do not see material risks to our favourable view of the flexibility and efficacy of U.S. monetary policy," it added.

"We believe the U.S. economic performance will match or exceed its peers' in the coming years. We forecast that the external position of the U.S. on a flow basis will not deteriorate."

Condos drive housing starts
Canadians, it seems, still haven't had enough of condos.

Residential construction starts jumped in May to an annual pace of 200,178 units, from 175,922 in April, The Globe and Mail's Tara Perkins reports.

That, Canada Mortgage and Housing Corp. said today, was juiced by a 22.2-per-cent climb in multiple units in urban centres, which could spark renewed fears where the condo market is concerned.

"May's increase in homebuilding suggests overall housing construction continues to garner support from condominium-related building, although the overall levels are still off from the highs seen in mid-2012 when the market was more frothy," said economist Emanuella Enenajor of CIBC World Markets.

"Today's data could mean that homebuilding activity in Q2 could be less of a drag than seen in the prior quarter, although we continue to see this sector struggling on weak secondary market activity, the fading impact of low rates and buyer fatigue."

OMERS, AIMCo in European deal
Two Canadian pension plans have teamed up to take over Vue Entertainment, one of the biggest cinema chains in the world, The Globe and Mail's Tara Perkins reports.

The deal, by the private equity arm of Ontario Municipal Employees Retirement System in partnership with Alberta Investment Management Corp., puts a $1.48-billion enterprise value to Vue, which has theatres in the United Kingdom, Ireland, Germany, Denmark, Portugal, Poland, Latvia, Lithuania and Taiwan.

'Big box' players gain increasing control of gas pump prices
A new study illustrates the growing influence on gas pump prices by players other than Big Oil, and why some Canadians are paying more than others.

Regional distributors and "Big Box" markets are gaining an ever-greater say, says the annual study by MJ Ervin & Associates as the oil companies play a lesser role.

Prices at 23 per cent of all gas stations in Canada are controlled by nine refiner-marketers, the study says.

"The remaining 77 per cent of all gas stations in Canada are price-controlled by individual outlet proprietors or non-refiner markets, a diverse genre of petroleum marketers, whose importance and influence is growing, particularly among two sub-types: Regional distributors and Big Box marketers," said MJ Ervin, part of The Kent Group.

"The latter in particular have an influence on the retail petroleum market – particularly in terms of price competitiveness – that is far out of proportion to their relatively small numbers of outlets."

Canada was home to 12,285 gas stations by the end of last year, or 3.5 for every 10,000 people, though that's different for each province, of course.

"This has a strong relationship to 'throughput efficiency' by province, which in turn has significant implications with the level of retail markup in each province's markets," MJ Ervin said.

"Markets with poor (low) throughput efficiencies tend to have higher retail gasoline prices (after tax differences are factored out) than those with high throughput efficiencies," the study added, noting there were 20,000 gas stations in 1989.

Big box players are those such as Costco and Canadian Tire.

Big Oil's representation in retail selling has been on the decline as the three major players, Shell, Suncor and Esso, now directly control prices at just 14 per cent of the gas stations.

"We have seen virtually no increase in the retail gasoline margin in over 25 years," said the research firm's Michael Ervin.

"Retail gas stations are no longer seen as a strategic asset for integrated oil companies," since refiners typically have ongoing gasoline supply agreements with several third-party retail chains who themselves do not operate refineries."

The big box group has gained in influence over the past 10 years, according to the study, and, "through competitive pricing and other incentives, has contributed to the overall decline in 'conventional' gas stations."

How Dad rates
What a coincidence.

Just yesterday, I suggested to my wife that, for Father's Day, I might like a 16-GB iPod Touch, which costs $229.

Then today, Bank of Montreal released a survey showing Canadians plan to spend an average of $95 on their dads, which means I'll be doing far better than the other guys on my street. But, hey, I'm worth it.

According to the Pollara poll, 94 per cent of the people who plan to spend for Father's Day this Sunday will boost the average from $86 last  year.

(I'm not sure what's with the other 6 per cent.)

The folks in Alberta and British Columbia will spend the most, at $116 and $101, respectively, while those on the Atlantic side will spend the least, an average $61. Ontario and Quebec are at $94 each.

And here's a key piece of information: BMO's earlier Mother's Day poll showed an average $107, or $12 better than Dad.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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